In Bavand v. OneWest Bank, F.S.B., the original deed of trust named IndyMac Bank, F.S.B. as the “Lender” and Mortgage Electronic Registration Systems, Inc. (“MERS”) as “the beneficiary” and “as a nominee for the Lender and Lender’s successors and assigns.” On December 15, 2010, “OneWest Bank, F.S.B.” claimed to be the “present beneficiary” and appointed a new trustee to institute a non-judicial foreclosure action. One day later, on December 16, 2010, MERS executed an assignment of the deed of trust, purporting to assign IndyMac Bank, F.S.B.’s interest to OneWest Bank, F.S.B. The court of appeals held that OneWest Bank, F.S.B. was not the “present beneficiary” at the time it appointed the successor trustee and had no authority to appoint a new trustee. As a consequence, the newly appointed trustee had no authority to conduct a non-judicial foreclosure sale. The court of appeals also held that MERS was not a proper beneficiary under the Deed of Trust Act (which requires the beneficiary be the “holder” of the note or secured obligation). Because it was not a proper beneficiary, MERS did not have the authority to cure the defect in the appointment of the successor trustee. Despite the beneficiaries’ lack of authority the court of appeals refused to extinguish the lien of the deed of trust on the property, holding that the property owner must rely upon the strength of its own claims and not on the weakness of the lender’s claims. The court did allow the property owner the opportunity to assert possible violations of Washington’s Consumer Protection Act. However, the ultimate outcome of these claims have been reserved for further proceedings.
This opinion serves as a reminder to lenders and property owners regarding the technical nature of the non-judicial foreclosure process. If you need assistance in this area, you may contact Luke Campbell, who has successfully conducted a number of non-judicial foreclosures.